Following are data from the statements of two companies selling similar products:

Income Statement Data for 2019Target Corpo.Wal-Mart Stores

Net Sales $65,357$408,214

Cost of Goods Sold45,583304,657

Selling and administrative expense15,10179,607

Interest expense7072,065

Other Income (Expense)(94)(411)

Income Tax Expense1,3847,139

Net Income$2,488$14,335

Balance Sheets Data (End of 2019)

Current Assets$18,424$48,331

Non Current Assets26,109122,375

Total Assets$44,533$170,706

Current Liabilities$11,327$55,561

Long-term Debt 17,85944,089

Total stockholders' Equity15,34771,056

Total Liabilities and stockholders' Equity $44,533$170,706

Beginning-of-2019 Balances

Total Assets$44,106$163,429

Total stockholders' Equity13,71265,682

Current Liabilities10,51254,390

Total Liabilities30,39497,747

Other Data

Average Net Accounts Receivable$7,525$4,025

Average Inventory6,94233,836

Net Cash Provided by Operating Activities5,88126,249

Capital Expenditures1,72912,184

Dividends4964,217

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PART A) What is the interpretation for each ratio.

PART B) Compare the Solvency, Liquidity and Profitability for the two companies.

1-Current ratio= Current assets/ Current liabilities

Target Corpo.

= $18424/11327= 1.63:1

Wal-Mart Stores

= $48331/55561= 0.87:1

Interpretation:

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2-Accounts receivable turnover= Net Sales/ Average account receivable

Target Corpo.

= $65357/7525= 8.69 times

Wal-Mart Stores

= $408214/4025= 101.41 times

Interpretation:

3-Average collection period= 365 days/ Accounts receivable turnover

Target Corpo.

= 365/8,7= 42 days

Wal-Mart Stores

365/101.4 = 3.59 days

Interpretation:

4-Inventory turnover ratio= Cost of goods sold/ Average inventory

Target Corpo.

= $45583/6942= 6.57 times

Wal-Mart Stores

=$304657/33836= 9.0 times

Interpretation:

5-Days in inventory= 365 days/ Inventory turnover ratio

Target Corpo.

= 365/6.6= 55.55 days

Wal-Mart Stores

= 365/9.0= 40.55 days

Interpretation:

6-Current Cash Debt Coverage ratio= Net cash provided by operating activities/Average current liabilities

Target Corpo.

= 5881/((current liabilities for beginning of the year 10512+ current liabilities for the end of the year 11327)/2)=0.54

Wal-Mart Stores

= 26249/((current liabilities for beginning of the year 54390+ current liabilities for the end of the year 55561)/2)=0.47

Interpretation:

7-Profit margin= Net income/ Net sales*100

Target Corpo.

= ($2488/65357)*100= 3.81%

Wal-Mart Stores

= ($14335/408214)*100= 3.51%

Interpretation:

8-Asset turnover= Net sales/ Average total assets

Target Corpo.

= $65357/(44106+44533/2)= 1.5 times

Wal-Mart Stores

= $408214/(163429+170706/2)= 2.4 times

Interpretation:

9-Return on assets= Net Income/ Average total assets

Target Corpo.

= $2488*100/(44106+44533/2)= 5.6%

Wal-Mart Stores

= $14335*100/(163429+170706/2)= 8.6%

Interpretation:

10-Return on common stockholders' equity= Net income*100/ Average common stockholders' equity

Target Corpo.

= $2488*100/(13712+15347/2)= 17.1%

Wal-Mart Stores

= $14335*100/(65682+71056/2)= 21.0%

Interpretation:

11-Debt to assets ratio= Total debt/ Total assets

Target Corpo.

= $(11327+17859)*100/44533= 66%

Wal-Mart Stores

= $(55561+44089)*100/170706= 58%

Interpretation:

12-Time interest ratio= Income before Interest and taxes/ Interest expense

Target Corpo.

= $(2488+1384+707)/707= 6.5 times

Wal-Mart Stores

= $(14335+7139+2065)/2065= 11.4 times

Interpretation:

13-Cash Debt Coverage ratio= Net cash provided by operating activities/Average Total liabilities

Target Corpo.

= 5881/((total liabilities for beginning of the year 30,394+ total liabilities for the end of the year $11,327+17,859)/2)=0.20

Wal-Mart Stores

= 26249/((total liabilities for beginning of the year 97,747+ total liabilities for the end of the year $55,561+44,089)/2)=0.27

Interpretation:

14-Free cash flow= Net cash provided by operating activities-Capital expenditures-Dividend

Target Corpo.

= $5881-1729-496= $3656

Wal-Mart Stores

= $26249-12184-4217= $9848